Слике страница
PDF
ePub

66

mon concern which goes towards making up the aggregate capital, whether his contribution consist in goods or money, so, in a joint-stock corporation, each person who becomes a shareholder contributes in effect the nominal amount represented by his shares towards the capital of the corporation, which capital constitutes the fund for employment in the corporate business. Capital stock" is the term frequently used in our present connection; and this capital stock is computed as so much money, constituting a certain sum which is divided into a number of shares. The stock is raised by the mutual subscription of the members of the corporation in the first instance, though the stockholders or shareholders in a corporation may be constantly changing afterwards through the transfer of stock or otherwise. And the corporation capital is divided into shares, the holders of which are entitled to a corresponding proportionate part of the profits of the corporate business, and are subject to assessment in the same proportion. But while the word "stock" is usually applied to the capital of a corporation, it sometimes refers more especially to the interests of individual shareholders therein.2

As a corporation is limited in its powers by the organic act or charter which gave it existence, we may usually ascertain the extent of the capital stock which any jointstock corporation is authorized to raise by examining such act or charter; and the same can be said as to the number of shares into which the capital stock is divided. But if a charter, instead of fixing the number of shares, provides that there shall not be less than a certain number, nor more than another number, the company may determine the number within the limits prescribed; 3 and so correspondingly, with charter provisions concerning the amount of the capital

1 See Ang. & Ames Corp. cs. 15, 16; Bouv. Dict. "Stock ;" and chapter on Corporations, supra. By "capital stock" we do not usually refer to the property of the corporation, to its "plant" so called, but to the amount contributed by the stockhold

ers as members. State v. Morristown Association, 23 N. J. L. 195.

2 People v. Commissioners of Taxes, 23 N. Y. 192.

3 Somerset R. R. Co. v. Cushing, 45 Maine, 524.

stock. Shares usually represent money contributions in a modern business corporation; but where the charter authorizes capital stock to be paid for in property, and the shareholders in good faith contribute property, instead of money, by way of subscription, third parties have no ground of complaint.1

§ 482. The Same Subject; Shares are Incorporeal Personal Property. Previous to the nineteenth century, corporations were rarely chartered, and questions concerning the nature of stock seldom arose in the courts. When canal, turnpike, and other companies, whose profits arose out of transactions connected with land, first began to be created, there was no little disposition to treat their stock as real estate; but at the present day the universal preference is to regard all corporation stock in the hands of stockholders as personal property. Often there are general statutes found to this effect; and it has been not an unusual thing for an act of incorporation to use such special expression as to remove all doubt on the subject. Thus, in England, the nature and incidents of shares in the joint-stock companies incorporated by letters-patent or act of Parliament have generally been designated in their respective charters or acts of incorporation, which at the present day always declare the shares to be personal estate, and so transmissible. The shares in some of the early American corporations were by statute made real estate, as in the instance of the Cape Sable Company in Maryland. But shares in the modern railroad companies appear to have always been treated as personal property, even where the charter was silent, conformably to the later English and American rule that shares in incorporated companies holding land for the purposes of their business must be considered personal property, unless the organic act or charter expressly declares otherwise. As for manufacturing, banking, and insurance corporations, whose business is primarily

1 Fort Madison Bank v. Alden, 129 U.S. 372.

2 Wms. Pers. Prop. 5th Eng. ed.

183-192; Dry butter v. Bartholomew, 2 P. Wms. 127.

Abb. Dig. Corp. 736; Cape Sable Company's Case, 3 Bland Ch. 606.

with personal property, there was far less reason why their stock should ever be regarded as real estate.1

In fact, as to every joint-stock corporation, the shares in a shareholder's hands entitle him to a proportionate part in a capital which is regarded as so much money; and his right is a money right so far as himself is concerned, even though that capital, with reference to the fictitious personage known as the corporation, be invested in real estate, or in goods and chattels, or, what is quite commonly the case, in both together, for the purposes of the corporate business. For this reason the lands of a corporation may be taxed as real estate, while its stock is personal property; and according to the modern doctrine, while a corporation may own a great deal of real and a great deal of personal property, the interest of each individual shareholder is a share of the net produce of both when brought into one fund, by way of capital

assets.

Shares in corporation stock being regarded therefore as personal property, they are to be classed with incorporeal personal property, or, as it is sometimes said, they are of the nature of choses in action; for the certificate of stock is merely corporeal evidence of the incorporeal right, and a muniment of title, as in the case of bills and notes; while shares of stock as a rule differ from bills and notes in being non-negotiable, or rather assignable instruments, as will be seen when we come to consider the method of their transfer.3 § 483. Dividends upon Stock; their Nature. -To that portion of the principal or profits (usually the latter) which the corporation, by its officers, divides among the stockholders on some periodical computation, we apply usually the term of dividend. Until a dividend is regularly declared, and thus

1 Ang. & Ames, § 557; Bouv. Dict. " Stock;" Edwards v. Hall, 6 De G. M. & G. 74; Tippets v. Walker, 4 Mass. 595. Contra, Welles v. Cowles, 2 Conn. 567.

2 Ib.; Rex v. Hull Dock Co., 1 T. R. 219; Bradley v. Holdsworth, 3 M. & W. 422.

3 See Rex v. Capper, 5 Price, 217;

Arnold v. Ruggles, 1 R. I. 165; Allen
v. Pegram, 16 Iowa, 163; Sewall v.
Boston Water Power Co., 4 Allen,
282; Ang. & Ames, 8th ed. § 560;
Mechanics' Bank v. New York R. R.
Co., 3 Kern. 599; Union Bank of
Tennessee v. State, 9 Yerg. 490;
Field Corp. § 133.

4 The ultimate object of an ordi

separated from the bulk of the capital stock, all profits and surplus funds of the corporation continue by their accumulation part of the capital itself. But a dividend which has been regularly declared, and is already payable, should be deemed not only incorporeal personal property (or a chose in action) but an unpaid debt due from the corporation to the individual stockholder, until he has drawn or appropriated it to himself.1 The right of the party to whom the dividend is payable is a separate and independent right, which may be enforced as against the corporation, notwithstanding his character of stockholder.2

§ 484. Stock, as distinguished from the Corporate Property. The nature of the stock of a company, and the rights and liabilities of the corporation concerning it, may depend greatly upon the organization of the concern: whether, for instance, the charter is a peculiar one; or whether, again, the capital stock is that of a full corporation, or that only of a joint-stock company. The rule is that, if an unincorporated company or a firm purchase property, each individual shareholder has an immediate interest in it; but that the moment a company becomes a legal corporation, the corporation, upon being invested with the legal title, has that property in trust for the individual members, or, in other words, for the stockholders.3 And hence, no stockholder as an individual, nor even a single person who owns all the capital stock, can separately act for the corporation or sue as legal owner of its property.4

§ 485. Over-issue of Stock; Partially-paid-in Capital, etc. A corporation, whose capital is limited by its charter, either

nary business corporation is the
pecuniary profit of its individual
members. Morawetz Priv. Corp.
§ 344.
This does not apply to a
savings bank. Huntington v. Sav-
ings Bank, 96 U. S. 388. Dividends,
of course, are personal property. 4
Mass. 595.

1 Phelps v. Farmers' &c. Bank, 26
Conn. 269; King v. Paterson R. R.
Co., 29 N. J. L. (Dutch.) 82, 504;
Wilkinson v. Charlesworth, 11 Jur.

644; West Chester R. v. Jackson, 77 Penn. St. 321; Morawetz Priv. Corp. § 351.

2 Ib.; Ang. & Ames, § 561; Taylor, §§ 568, 750; § 510, post.

3 Wordsworth's Joint-Stock Companies, 288; Ang. & Ames, § 559; Regina v. Arnaud, 9 Q. B. 806; supra, § 231.

4 Button v. Hoffman, 61 Wis. 20 ; England v. Dearborn, 141 Mass. 590; Taylor, § 187.

in amount or the number of shares, cannot issue valid certificates in excess of this limit.1 Nor can the price of shares fixed by charter be disregarded.2 And it appears that any bona fide holder of stock certificates which are spurious, because a fraudulent over-issue, can sue the parties who made the over-issue, although his purchase was from other persons; and so with other fraud in issuing the certificates.* As a general rule, a corporation cannot change the amount of its capital as prescribed in its charter; and all attempts to do so are void.5 The stock thus created is void and the attempt to increase it is ultra vires; and the holder of such certificates has none of the rights and is subject to none of the liabilities of a holder of authorized stock.

And while a stockholder may be estopped to set up informalities in the issue of stock which the corporation had legal authority to create, the nullity of unauthorized stock may be alleged by its holder.8

But when a corporation is created with a defined capital, which has been only partially paid in, the directors may afterwards receive subscriptions and issue certificates for the balance, entitling the holders to all the rights of the original stockholders. Nor have the original stockholders any prior right of subscription to these shares. In fact, where there are no legislative provisions to the contrary, it would appear

1 Bruff v. Mali, 36 N. Y. 200; cases post; Railway Co. v. Allerton, 18 Wall. 233.

2 Sturges v. Stetson, 1 Biss. 246. 8 Bruff v. Mali, 36 N. Y. 200. He may recover from his vendor. Arnold v. Ruggles, 1 R. I. 165.

4 Field Corp. § 126.

5 Mackley's Case, L. R. 1 Ch. D. 247; Stace's Case, 4 Ch. App. 682 n.; Mechanics' Bank v. N. Y. & N. H. R., 13 N. Y. 599; 34 N. Y. 30; Railway Co. v. Allerton, 18 Wall. 233.

6 Scovill v. Thayer, 105 U. S. 143. 7 Upton v. Tribilcock, 91 U. S. 45; 95 U. S. 665; 96 U. S. 328; Taylor, $ 541.

8 Such is the lately declared view

of the Supreme Court of the United States. See Mr. Justice Woods in Scovill v. Thayer, 105 U. S. 143; 118 U. S. 634. Over-issued stock reduces the value of the original stock, which thus becomes sometimes known as "watered stock; "a term applied also to issues in a purchase largely in excess of a true valuation. Generally by an over-issue a fraud is committed upon such stockholders as have not assented. Field Corp. § 144. If such over-issue is fraudulent and ultra vires, semble the corporation is not bound by the agents' acts, but the agents themselves become liable for over-issued stock.

9 Curry v. Scott, 54 Penn. St. 270.

« ПретходнаНастави »